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Performance appraisal best practices we use

No one-size-fits-all performance appraisal process

The process needs to be adapted to the specific needs of the firm and industry. Our benchmarks show that best-in-class corporations vary in their processes. The actual objectiveness of a performance appraisal process is derived from two dimensions: a corporate culture fostering openness, fairness and objectiveness, and the performance appraisal process itself. For instance, some organizations benefit from a highly objective performance evaluation process with a relatively “light” process, while others need a highly structured process to obtain the same level of objectiveness.

Formal appraisal processes are not always superior in objectiveness and decision quality to more informal ones: a corporate culture encouraging objectiveness and openness to differences can have a stronger and more positive impact than highly structured and fact-based HR processes. Some highly structured decision-making processes can sometimes be too complex, generate cognitive overload and reduce objectiveness. It is therefore highly important to adapt the structure of the process to the level of objectiveness of the culture.

Performance appraisal process

Integrating the impact of the automatic workings of the mind

The Diverseo matrix: ability to leverage a corporation’s human capital
Science and our experience with corporations evidence that the automatic workings of the mind cannot be overridden. No matter what our conscious or explicit mind will decide, our automatic or unconscious mind will operate and keep on associating concepts and ideas, outside of our own awareness. Such unconscious associations will have an impact on our explicit attitudes, especially when it comes to social interactions. They will also influence how we evaluate someone’s performance. Most of the time, even best-in-class performance appraisal processes show very limited effectiveness to reduce the unwanted impact of the workings of our mind: effectively reducing such impact is a complex task. Based on the information we perceive, we make shortcuts, interpret the information by integrating our own automatic assumptions. Some characteristics of the processes might further reinforce the impact of such shortcuts. For example, some processes are too complex and generate cognitive overload. Others are too light and do not allow for fact-based analysis of performance. Our client work, using advanced quantitative analysis, has shown that quantity of words in self appraisals can also have an impact. In some organizations, many words lead people to believe someone is a high performer, in others, that he/she is a low performer needing to justify him/herself.

Imposing a standard performance appraisal process to different companies does not help. The right approach is to surface how people actually process information in their minds and how the corporate culture influences their decisions. It is only by integrating such elements that a performance evaluation process that best fosters objective decision making can be designed.

A fact-based process

Research on the unconscious workings of the mind shows that the performance of two people will be perceived differently depending on who they are, where they come from and who assesses them. Therefore, providing the right level of “cold” and homogeneous facts about performance, along with guidance for calibration, is needed to provide fairer chances to succeed across various social groups. Such a process will reduce the odds of having some senior managers promoting their “own foals” whenever these do not deserve such a differentiated treatment.

Performance criteria aligned with competitive advantages

DDistinctive performance drivers are different from one organization to the next. The best performance appraisal processes therefore align performance criteria –and thus expectations and behaviors- with competitive advantages developed by the corporation over time.

Owned by management who needs to trust decisions made

In best-in-class corporations, the performance evaluation process is mainly performed by line management –including senior management- and supported by HR. Management ownership and trust in the system are highly important to actually provide all talents with equally strong opportunities.

A simple process, integrated in regular business operations and supported by the HR IT system

Our benchmarks show that too much paper work reduce overall managerial buy-in and motivation. Our experience also evidenced that too much involvement from managers to analyze and defend one’s candidate reinforces decision-making shortcuts as managers become emotionally involved instead of conducting an open and fact-based analysis. In two Fortune 500 corporations with complex HR processes, our assessment of the performance evaluation process evidenced the more managers believed a subordinate deserved to be promoted, the more they performed exhaustive and complete performance assessments. To put it simply, when managers implicitly believe a subordinate “fits” into the high performing group, he/she will make the additional effort to analyze performance in detail so that the subordinate is better evaluated.

To that end, best-in-class corporations have often automated as much as possible fact gathering and data reporting, leveraging information technology. Managers are therefore involved more in discussing the information than in a tedious and time consuming information gathering process.

Flexible

Best-in- class companies usually update the process every two years on average, mainly by adapting to changes in the labor market or corporate strategic posture.

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